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xAI’s $20 billion mega-raise: Nvidia chips fuel Elon Musk’s AI Colossus expansion

MacDailyNews

Oct 8

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Elon Musk’s xAI is set to secure a $20 billion funding round, surpassing initial plans, with investments from Nvidia and other backers. The financing, a mix of equity and debt, will fund a special purpose vehicle to acquire Nvidia processors for xAI’s Colossus 2 project. Nvidia’s contribution includes up to $2 billion in equity, boosting its clients’ AI development efforts.

Carmen Arroyo and Edward Ludlow for Bloomberg News:
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xAI’s fundraising effort, previously reported by Bloomberg at half the amount, may continue to grow.
xAI’s financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt in the SPV, the people said. The vehicle will be used to buy Nvidia processors, and Musk’s artificial intelligence startup would then rent the chips out for five years, allowing Wall Street financiers to recoup their investment. The unique deal structure, backed by the GPUs as opposed to the company, could provide a playbook for tech firms looking to decrease debt exposure.
Nvidia’s leaders have said they will use the company’s growing financial strength to speed up the deployment of artificial intelligence across the industry. In September, Chief Financial Officer Colette Kress told the audience at a Goldman Sachs conference that Nvidia will repurchase stock and do strategic acquisitions where possible, but the priority is on using cash to help other companies use AI more quickly.
Musk has also tapped his empire of companies, including SpaceX, for investment into xAI. Later this year, Tesla Inc. investors will vote on whether the electric carmaker should invest in xAI as well.
Musk has framed AI as the foundation for many of his futuristic products, including self-driving cars and fully autonomous robots.

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MacDailyNews Take: xAI’s Grok, already impressive, is poised to improve even further.

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